02475cam a22002777 4500001000600000003000500006005001700011008004100028100002200069245016500091260006600256490004100322500001500363520124400378530006101622538007201683538003601755690006601791690010201857700002501959700002201984710004202006830007602048856003702124856003602161w5140NBER20150331141748.0150331s1995 mau||||fs|||| 000 0 eng d1 aBuiter, Willem H.12aA Center-Periphery Model of Monetary Coordination and Exchange Rate Crisesh[electronic resource] /cWillem H. Buiter, Giancarlo Corsetti, Paolo A. Pesenti. aCambridge, Mass.bNational Bureau of Economic Researchc1995.1 aNBER working paper seriesvno. w5140 aJune 1995.3 aThe paper analyzes the modalities and consequences of a breakdown of cooperation between the monetary authorities of inflation-prone Periphery Countries that use an exchange rate peg as an anti- inflationary device, when the Center is hit by an aggregate demand shock. Cooperation in the Periphery is constrained to be symmetric: costs and benefits must be equal for all. Our model suggests that there are at least two ways in which a generalized crisis of the exchange rate system may emerge. The first is when the constrained cooperative response of the Periphery is a moderate common devaluation while the non-cooperative equilibrium has large devaluations by a few countries. An exchange rate crisis emerges if Periphery countries give in to their individual incentives to renege on the cooperative agreement. In the second case, the Center shock is not large enough to trigger a general devaluation in the constrained cooperative equilibrium; yet some of the Periphery countries would devalue in the Nash equilibrium, making the monetary stance in the system more expansionary. In this case, reversion to Nash is collectively rational. We offer this model as a useful parable for interpreting the collapse of the EMR in 1992-93. aHardcopy version available to institutional subscribers. aSystem requirements: Adobe [Acrobat] Reader required for PDF files. aMode of access: World Wide Web. 7aF31 - Foreign Exchange2Journal of Economic Literature class. 7aF33 - International Monetary Arrangements and Institutions2Journal of Economic Literature class.1 aCorsetti, Giancarlo.1 aPesenti, Paolo A.2 aNational Bureau of Economic Research. 0aWorking Paper Series (National Bureau of Economic Research)vno. w5140.4 uhttp://www.nber.org/papers/w514041uhttp://dx.doi.org/10.3386/w5140